Retail Ramblings Podcast

Episode #5 - Beauty is Trending

Episode Highlights:

Retail winners. This week’s retail winners are Compact Power Equipment Inc. and Covergirl. We explore how these retail brands are growing their footprints and setting themselves apart from the competition.

Retail losers. We take a look at this week’s retail losers, which include Sears, Kenmore Appliances, and Revlon. We provide commentary around what these well-known retail brands can be doing to bounce back after some disappointing announcements.

The retail roadmap. We discuss the latest trends dictating the future of retail.

Data dive. We talk about some interesting uses of data, and show how big data can have some unintended consequences.

Listen to Episode 5: Beauty is Trending

Show Notes

Retail Winners & Losers

Winner: Compact Power Equipment Inc.

They provide equipment rental and maintenance services across the U.S

Equipment rental is main competency

Purchasing tools for every single maintenance job can become a costly procedure

Compact Power Equipment give the pro and DIY shopper the ability to simply rent

Been in partnership with THD since 2009

Started at 3 pilot stores that now extends to over 1000 stores

Short and long-term rentals for construction as well as landscape equipment to Home Depot’s Pro customers

Home depot inked a $265 mil deal to purchase the company based out of Fort Mill, South Carolina

One of very few acquisitions by The Home Depot in recent years

North America

Over 1,000 THD stores

Shows The Home Depot’s continued focus on the ‘pro’ segment as well as your DIY customers.

Investing in capabilities that serve its core customers. Understanding that their service extends beyond being a simple retailer

Customer experience is a priority which is enhanced through more product options

Winner because of how

Lowe’s made a similar purchase of Maintenance Supply Headquarters in May in an effort to expand their pro customer base

For Lowe’s, Pro’s make up a small portion of their customer base, but the pro business is growing much faster than your general DIY customer.

Loser – Sears and Kenmore Appliances

A partnership to sell Kenmore appliances on Amazon could add new sales for Sears and expand Amazon’s appliance ambitions. But will Amazon shoppers flock to a brand some say is dying?

In response to the announcement, shares of Home Depot, Lowes and other appliance retailers fell.

Under the terms of the deal, Sears will sell Kenmore, Kenmore Pro and Kenmore Elite refrigerators, Alexa-enabled ACs and other smart appliances direct to Amazon. The e-tailer will own the inventory but will lean on Sears’s in-house Home Services unit and Innovel Solutions subsidiary for delivery, installation and extended service support.

Ultimately, the move may prove to be a mere stop-gap measure as the retailer wends its way toward bankruptcy.

“Let’s not dance around it, Sears Holdings Corp. is an utter disaster despite its new appliance deal with Amazon.”

Selling Kenmore appliances through the largest e-commerce platform in the country is certain to expose Sears to a larger and broader audience for the brand. Sears noted at the time of the announcement that the Amazon partnership was the first of its kind and represented the widest distribution of Kenmore outside of Sears’s own stores and websites.

“Just because Kenmore is available on Amazon doesn’t mean customers are going to want this dying brand anymore than they do now, especially as news of Sears’ future grows more negative and the industry moves toward more smart appliances, hence giving customers more options beyond Alexa.

If the deal is unlikely to kill off the appliance heavies in the retail world, it’s not likely to be Sears’ salvation either, given the company’s deep and well-documented financial concerns.

Sears still needs $2 billion of liquidity annually to survive as a going concern. “With regard to the overall credit story, we don’t think this is a game changer or a material change in any way,” “It’s obviously a positive step for them to find this type of partnership, but in and of itself it’s not a material game changer in the overall Sears story.”

And while Sears could boost sales of the Kenmore brand through the Amazon deal, the retailer runs the risk of cannibalizing sales from its stores. “Is every sale they do Amazon potentially taking market share from someone else, or is it a sale they would have done out of their own store anyway, and potentially less lucrative because Amazon takes a piece of that?” Silverman said.

But the Amazon pact is a dual-edged sword. While on-site sales will certainly boost Kenmore’s profile – particularly among a millennial crowd that doesn’t frequent Sears – it also gives consumers one less reason to visit its stores.

Covergirl has the most loyal consumer base out of all major cosmetics brands

Consistent across different segments of Millennials, Generation X and Baby Boomers

Nearly half of their customers surveyed in this poll of around 1000 cosmetics users over the age of 18 have been using Covergirl for 5 or more years

Study goes on to outline their most popular products are makeup inclusive of:

Blush/Bronzer

Foundation

Powder

Concealer

Can cost 7 times as much to source a new customer to foster an existing relationship with a current customer

Brands are working more aggressively to get ‘cult’ followings

Correlation between loyalty and usage levels

Affordable brands available for purchase at non-specialty stores came out on top over high-end offerings

drugstore brands came out as the most desired amongst buyers, with millennial consumers listing CoverGirl, Maybelline and Neutrogena as the top three favourite brands thanks to their budget price tag and efficacious formulas

Premium brands struggled

Yves Saint Laurent and Chanel some of the worst performers

38% of respondents say loyalty comes from superior products.

30% say loyalty comes from using their brand for a long time

69.3% of customers who are loyal are likely to recommend to friends

12.0% will leave brand reviews

6.7% will leave social media content

Impact for covergirl’s growth strategy is immense.

Covergirl has a focus on diversity, resonating with customers

Generally have their finger on the pulse in terms of products

Quality is the most important factor amongst all else.

Another independent study showed that only 7% of recent cosmetics purchases were made without the influence from some sort of beauty blogger

Insinuates Cover Girl’s products are superior to that of their competitors

Study also shows that women are less likely to try new products frequently, making loyalty all the more important

Millennials buck this trend, and are the least loyal and the most inclined to change products

Driven by net sales declines in North America and decline in mall and department-store traffic.

“While our financial performance and sales results in the US remained soft in a challenging retail environment, we are encouraged by the global growth of our iconic Revlon and Elizabeth Arden brands, our international sales which remain robust and the key strategic initiatives that we have implemented during the quarter, which we expect will drive sequential improvements in company performance,” said Revlon President and CEO Fabian Garcia.

Revlon is focusing its global expansion on large and fast-growing geographies, developing a strong product pipeline for the second half and is continuing to make progress in digital communications and e-commerce.

Revlon is on course to deliver US$50 to US$60 million in synergies over the year, with US$24 million achieved in the first half

The Retail Roadmap

No part of the customer journey is safe from data collecting — not even the fitting room!

In a brutal retail landscape cast in Amazon’s ever-expanding shadow, brands’ ability to gather, understand and react to customer-driven data has hit a do-or-die point of urgency

What’s most important for retailers when using data and technology to interact with customers is that they actually respond to what customers want and don’t want

Every time a customer comes in and out of the fitting room, they’re demonstrating a choice about a brand’s product

So, fitting rooms are evolving past poorly lit mirrored closets and transforming into critical data touch points. By tracking the movement of in-store products using RFID technology and scanning systems, brands and retailers can follow item-by-item performance to make decisions

If something never goes into the dressing room, or if it doesn’t convert, it’s an indicator to stop putting that out.

If there’s something that converts really well, a retailer should be promoting that item. The floor serves as a place for intelligent customer product suggestions.

In its fitting rooms, Reformation has screens that display what’s being tried on, and lets customers alert staff that they’d like to try a different size and color.

For brands looking to mine customer data from the fitting rooms, customer-facing tech also plays a role: Rebecca Minkoff and Ralph Lauren have both experimented with the same smart-mirror technology from Oak Labs that, using RFID tags.

Instantly recognizes what items are in the fitting room when a customer enters. From there, customers can browse other colors, sizes, and what suggested items go with those products.

They can also change the lighting of the fitting room for a better view.

The better experience someone has in the fitting room, the more likely they are to buy.

At the same time, brands can keep an eye on specific items: If something keeps going into the fitting room and not getting purchased, it signals that something’s wrong.

Omnichannel implications: Opens up flow of communication between online and in-store. For example, Online athletic brand Fabletics, which operates on a membership model, lets customers leave items they’re unsure about in their shopping carts online in order to come back to them later. That data is then used to retarget customers based on their in-store interests.

Retailers aren’t tech organizations. Amazon has 18 years of data profiling and reacting on it.

It’s scalable, but retailers and brands need to position themselves to be able to pivot on a daily basis in reaction to this data

Powered by AI to make judgement on what a consumer is reflecting through facial expressions

Placed in high traffic areas to boost the sale of high-margin items or impulse purchases (we want to attract their attention, cause them to turn their head)

The display also records facial characteristics to recognize if a person returns to the shelf within 24 hours

In store shopping, particularly in grocery and convenience stores are ripe for disruption

Not a lot of innovation happening in those spaces

With the addition of Amazon in grocery, the industry is about to enter a phase of hyper-competitiveness and require an increased push for innovation

People shop at eye-level

Screens, atm, are located above eye-level

Space that is ripe for innovation

Repercussions for brands

Allows marketers to change their offering on the fly (particularly if a consumer is displeased)

Allows them to access in store data

This is going to become increasingly important.

The best retailers we’ve seen already share data in a multitude of different areas, such as POS. This looks prior to point of sale and allows marketers to paint the entire customer journey through data and insight

Allow to sell multiple products at once

Different product combinations

A/B testing (down to the point based on reactions (were there more positive or negative reactions)). Sales isn’t necessarily the only repercussion

Trust plays a big part. Consumers are more likely to trust digital advertising because it is perceived to be connected to POS and therefore be up to date

Indicative of a more integrated, holistic retail environment where retailers and brands are working in tandem

brands with impulse buy-potential, ie: health and beauty, snacks and drinks, cleaning products, will perform best

They are also effective at articulating a value proposition and possibly creating larger purchases than shoppers had planned. At the moment, it’s pretty complex to install these systems, so end caps make the most sense

Cognitively, people are inured to the large amounts of static information around them,” Gownder said. “By adding digital, in-motion information, the sign stands out in a sea of same-ness.”

Repercussion for Cloverleaf who will control all the data and subsequently use the data to help inform brands on different demographics and segments are their own product inclinations

Great soundbite: “The more robust information that we can provide,” he said, “companies like P&G say give me as much as you can, because it’s information they don’t have today.”

Particular repercussion for CPG and FMGC

Tastes and brand loyalties seem to change on a whim

Campaigns the ability to act and react in a marketplace where nimbleness is rewarded and complacency condemned to the faceless masses of a hypercompetitive industry

FMCG companies are inherently more reliant on old-fashioned models like shelf space and end caps in markets

The combination of big data and AI-powered algorithms can provide the immediacy needed to mold a campaign around such a rapidly changing customer base